Nandor Hidegkuti scores Hungary's final goal in their 6-3 win against England at Wembley on 25 November 1953. Photograph: Popperfoto

Hungary's 6-3 victory at Wembley 60 years ago resonates like no other in the history of English football. It wasn't just that this was a first home defeat to non-British or Irish opposition, the magnitude of the scoreline or the brilliance of the Hungarian display: it was the sense of shock. Over the course of one game – one hour even, given Hungary pretty much eased off in the final third – the complacency and the insularity of the English game were exposed. After 25 November 1953, none of the old certainties were certain any more.

Six months earlier, four of the England team had been at Wembley playing for Blackpool in the FA Cup final, a match that was seen as representing English football at its best; it's arguable even, that was the day when football replaced cricket as the pre-eminent sport in England. As Stanley Matthews dribbled down the right again and again, attacking Tommy Banks, a full-back struggling with a pulled muscle, and inspiring Blackpool's comeback from 3–1 down to win 4–3, even cynics in the press box stood on desks to applaud. The master, at the age of 38, at last had a medal and as Gordon Richards rode Pinza to his maiden Derby triumph and a British expedition conquered Everest in the weeks that followed, it seemed 1953 heralded a golden age for British sporting achievement.

Yet the warning signs had been there had anybody been minded to see them. England's first defeat to continental opposition had come away to Spain in 1929 and had been blamed, in so much as anybody paid it any attention at all, on a hard pitch, hot weather and an excitable crowd that at one point had to be kept off the pitch by officers wielding swords. There was a prevailing sense that football not played in English conditions was barely football at all.

Perhaps those were legitimate excuses, but a trend was developing: England struggled against teams that set up in any other shape than the W-M. Deep-lying centre-forwards invariably unsettled them. Matthias Sindelar had worried England by dropping deep for Austria in a friendly in 1932, Vsevelod Bobrov had done much the same against a range of sides on Dinamo Moscow's 1945 tour, and Switzerland's Alfred Bickel had troubled England in 1947. In 1951, England toured Argentina and found themselves facing the same difficulty.

They were scheduled to play the national team twice, first in a representative game and then in a full international. England, taking the distinction more seriously than their hosts, fielded a number of fringe players in the representative game and were beaten 3-1 by a full-strength Argentina inspired by the deep-lying centre forward José Lacasia, who kept drawing the centre-half Malcolm Barrass out of position.

Walter Winterbottom, the England manager, came up with a plan. "Some people wanted to have a man following him, dogging his footsteps," he said, "but Billy [Wright] quite vehemently wanted the centre-half to stay back, in position, and let someone else pick off Lacasia. We decided that [Harry] Johnston, the centre-half, would go with him in the early part of the match, with Billy and Jimmy Dickinson covering the gap in the middle, then Johnston would fall back in favour of someone else so that the Argentina team would not quite know if we were going to persist in man-to-man marking. But the match was washed out by rain after 20 minutes' play so the issue was not really joined."

Winterbottom is an under-appreciated figure these days, derided as professorial and out of touch and the man who presided over England's decline. Yet the truth is he saw the future and was prevented from doing anything to avert it. Part of the problem was Matthews and the cult of dribbling he inspired.

When Stan Cullis, for instance, captaining England in a war-time international against Wales at Wembley, reacted to the news that the Welsh planned to double-mark Matthews by instructing his side to spread the play as often as they could to Dennis Compton on the left, he was roundly condemned, despite the fact that England went on to win 8-3. "The newspapers gave me a right rollicking," Cullis said, "and asked how I'd dared treat Stanley Matthews like that. They insisted the spectators had gone to watch Matthews, not me, and demanded that I be forced to give up the captaincy."

Matthews, not surprisingly, was all in favour of self-expression, something clear from the explanation he gave in his first autobiography for the shambles of the 1950 World Cup, when England were eliminated in the group stage after losing to the USA in Belo Horizonte (it didn't help that he had missed the beginning of the tournament after being forced to go on an FA goodwill tour of Canada). "A will to win was sadly lacking in the England team," he wrote. "I blame this on the pre-match talks on playing tactics that had been introduced for the first time by our team manager [Winterbottom].

"You just cannot tell star players how they must play and what they must do on the field in an international match. You must let them play their natural game, which has paid big dividends in the past. I have noticed that in recent years these pre-match instructions have become more and more long-winded, while the playing ability of the players on the field has dwindled. So I say scrap the talks and instruct the players to play their natural game."

He was not alone. "The unpalatable truth," wrote the Swedish journalist Ceve Linde in Idrottsbladet, "is that English soccer has gradually deteriorated, finally fallen off its pedestal and now keeps rolling downwards. The sorriest feature in the drama is that the English, with very few exceptions, cannot get themselves to recognise what has happened. In their self-satisfaction and conceit they still fancy themselves the first in the football world and their defeats sheer accidents.

"The fact is that English soccer has an enormous amount to learn from the rest of the world, about training, courses, tactics, organisation and strategy … 'England must find her traditional spirit' they are writing now. This is easily said but how shall this be found again in a country which has been hit so hard by two world wars and which has been forced by national weakness to let go her possessions all over the world? The same tiredness is to be found in English soccer. This perfectly understandable lack of strength, however, is mated with a haughtiness which to an outsider appears unpleasant, even frightening …"

After the 1951 tour of South America, Winterbottom knew the tide was against him. "Some good players are coming through," he said, "but in team play we are way behind. From match to match there are too many changes to make planning possible." It could be a lament for the whole history of English football.

In October 1953, England played against a Rest of the World side to celebrate the 90th anniversary of the foundation of the FA. The Rest of the World used a fluid attacking trident of Gunnar Nordahl, Bernard Vukas and Laszlo Kubala – and England again failed to react, with their the centre-half Derek Ufton struggling badly. "Deserted by his 'prey', he felt like a fish out of water," wrote the Austrian journalist Willy Meisl. "One could see he felt acutely embarrassed, not to say lost. To follow Nordahl, or to let him roam? This stopper led a purposeless life for 90 minutes because a fanciful foreign centre-forward refused to play the game according to the British pattern." A dubious last-minute penalty earned England a 4-4 draw.

What Hungary then achieved was simply another chapter in the same story. Nandor Hidegkuti sat deep, as a 'false nine', Harry Johnston had no notion of how to deal with him, and as a consequence the Hungarian No9 had time and space to dictate the game as a fluid front four roamed in front of him. The scales fell from English eyes: 6-3 was bad enough but the truth is that result scarcely reflected Hungary's superiority.

They had one goal incorrectly ruled out for offside, missed countless chances and were unusually sloppy at the back; that they beat England 7-1 in Budapest the following year was no surprise. "It was the mother and father of a good hiding," wrote Clifford Webb in the Daily Mail. "We were out-speeded, out-smarted and out-stayed … I can only hope it will have a revitalising effect, and jolt our soccer chiefs into the realisation that control of the ball at speed is the secret of success nowadays."

Up to a point, it was. Suddenly everything was up for debate. A spirit of innovation took over the English game. Peter Doherty, the manager of Doncaster, noting that Hungary's team was numbered unconventionally, that it wasn't as simple as the 2 marking the 11, 3 marking the 7, 5 marking the 9 and so on, had his players wear random numbers to try to confuse the opposition. At Manchester City, Don Revie aped Hidegkuti and dropped deep, his performances in 1954-55 making him footballer of the year.

What Hungary had done at the other end was just as significant, with Jozsef Zakarias operating so deep as to be almost a second central defender (there is some confusion about this, but the notebooks of Gusztav Sebes, Hungary's coach, show clearly he saw Zakarias as a very deep-lying midfielder). By the end of the decade, after Brazil had won the 1958 World Cup using the system, the back four was an accepted fact and was being deployed at Ipswich by Alf Ramsey, who had been England's right-back in the defeat at Wembley. The wingerless system with which Ramsey led England to the World Cup in 1966 can be seen as a logical evolution of Hungary's shape – if not their style.

But to draw the conclusion, as many have, that Ramsey was directly influenced by the defeat is probably over-simplistic. His instinctive suspicion of anybody non-English was such he would probably never had admitted learning from a foreigner anyway, but he seems genuinely to have felt Hungary were fortunate, blaming the England goalkeeper Gil Merrick for the defeat and noting that four of the goals came from shots from outside the box (actually, only three did). But there was another source of similar lessons that was probably far more significant: Ramsey's Tottenham manager Arthur Rowe.

Rowe had been a key figure in Peter McWilliam's Tottenham side of the late 30s, and it was his development of the push-and-run style that had led Spurs to promotion and then the league title in 1951. Rowe was so inculcated in the style that he went to Budapest to lecture on it and found he shared many ideas with the Hungarians before being forced home by the Second World War. For Ramsey, Hungary probably seemed just a more intense version of the style he was used to at club level anyway.

What the defeat did, though, was to shatter the myth of English superiority. Harking back to the way things had always been done as though the ancient tradition were some kind of immutable wisdom was no longer viable; an environment was created in which Ramsey and others were able to experiment. This had not been a defeat in Madrid in May, or in Belo Horizonte in July; it had been a defeat at Wembley on a damp pitch on a misty November afternoon, in conditions most believed football was meant to be played in. The shackles of the past were broken and were only reapplied when, after 13 years of innovation, victory in the World Cup established a new tradition.

There was much talk, encouraged by Sebes, of Hungary representing a bold socialist future set against the individualism and conservatism of an imperial Britain in retreat – something emphasised by the fact that Wembley was then known as the Empire Stadium – but what his team's victory achieved was liberation for English football. Most assumed that afternoon they had seen the future World Cup winners. In a sense they had; it's just that success came not in Bern the following year but on the same field in 1966, and it wasn't Hungary who would be champions but England.